THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

KYRA PHILLIPS, CNN ANCHOR: We're going to go back to Jane Arraf, who is there live at the scene as crews continue to search for victims beneath the rubble. Jane, can you give us a bit of an update of where things stand? Any survivors?

JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: Kyra, it appears there are no survivors. And it appears there are not going to be any survivors. They have just pulled from the rubble the body of another victim, perhaps the 28th victim to die in this huge car bombing. Now, that is now 28 people dead, 40 people wounded.

And it looks as if there is no one who could possibly be alive under that amount of rubble. They've basically been buried by tons of bricks, steel girders and wood. The remains of this house, what's left after this bomb, what U.S. officials are now saying was likely a suicide bomb came careening down the street, setting off 1,000 pounds of explosives, Kyra.

As for survivors, they had hoped initially that there would be. There are none. And there are unlikely to be any, instead, just another scene of devastation, another suicide bomb in this crowded neighborhood. And reports from the director of the hotel who we've just spoken with who says that among the victims, there are believed to be two Britons, as well as two Jordanians and other Arab guests -- Kyra.

PHILLIPS: What can you tell us about the Karrada district, Jane? Sort of give us a feel for the home behind you, also the Lebanon Hotel, how close that is to you. And is this a busy area at 8:00 in the evening? Give us a feel for this neighborhood.

ARRAF: It's a very busy area, Kyra. It's in central Baghdad.

And Karrada is one of the main shopping districts, one of the main commercial districts. It's one of the original neighborhoods in old Baghdad. Now, this street itself is not a very unusual street. There are many like it. It's quite a narrow little street. On one side, there are ordinary homes, not very -- middle-class homes, if you will, beautiful gardens here. The remains of one, you can see.

Across the street, where the car bomb exploded was, as you say, the Mount Lebanon hotel. And the director tells us that it was built just almost a year ago. In fact, they opened after the fall of Saddam. It was extremely hard to have hotels here under Saddam's regime. They had to be either completely government owned or partly government owned. And they were under like everything here very strict control. After the regime fell, there was a small explosion of businesses, including this hotel, which still looked new.

You can still tell that under the devastation this was a modern, new hotel. Now, at the time of the bombing according to the director, he says that he had just left 15 minutes ago, actually. He was walking down the street and when he heard the blast turned back. He said that in that hotel, again, a small and modest hotel, they were saying two British employees of the local mobile phone company, two Jordanians, two Egyptians, the Lebanese owner of the hotel and perhaps 20 Iraqi employees of that hotel, again, not a very prosperous street, not one that a lot of foreigners would stay at, but quite close to the major hotels that are much better protected than this small and modest hotel and these modest homes were -- Kyra.

PHILLIPS: Well, Jane, not losing sight of what has happened this evening, and the deaths of the 27 people, and still as rescue crews continue to look for more bodies, a bit of an overall picture.

I've had the chance to interview a brigadier general with the Iraqi police force. You interviewed the fire chief there on the scene. This is something new to all of us. Previously, we were always talking to coalition forces and U.S. military. So in this time when advancing democracy and rebuilding Iraq is a priority, yes, we are seeing the insurgence and the growth and the damage and the deaths, but can you tell me what you witnessed with regard to the police, the fire department? And were you impressed by how Iraq is moving forward, at least, trying to build up those systems?

ARRAF: Kyra, it almost seems as if it's one step forward, one step back.

Now, the steps back, of course, are these incredible, horribly devastating suicide bombs that just basically kill anything in their path, no matter how meaningless the attacks seem to be. But the steps forward are as you described, the Iraqi police, the Iraqi firefighters.

And I am continually amazed and continually -- I think one has to be continually inspired by the fact that here, take a look at the scene. These people never existed before.

We have a fire chief, a fire chief of this neighborhood, who has come out late at night, in danger, along with his men. These are all Iraqis. These forces never existed before.

This morning, I was out on an operation with the 1st Armored Division in charge of Baghdad. They were working with the Iraqi Civil Defense forces, and for the first time, the defense force commander was communicating with his troops by radio.

Now, these seem like very simple things, Kyra, but you're absolutely right to point it out. We cannot take these for granted. It is phenomenal. And if you see it, this is almost a metaphor of the scene. Out of this rubble is emerging -- out of the rubble of this country, perhaps, is emerging something new, something that can perhaps prosper. And here we are seeing several segments of Iraqi workers, Iraqi organizations taking control of this disaster, trying to help, trying to save people.

They're all Iraqi, and they're withstanding these bombs. And they will continue to be here, they say.

Kyra, we wanted to bring over Colonel Ralph Baker, who is in charge of this district. And he is one military official that perhaps knows it better than anyone.

Colonel Baker, we're just going to make sure we can hear you. Now, I have to say, I keep running into you at these explosions. And is there anything about this that's either similar or different to other ones that you're seen in your sector?

COL. RALPH BAKER, U.S. ARMY SPOKESMAN: This explosion is very similar to some of the other attacks we've seen in our zone. It's a car bomb of approximately 1,000 pounds. It has artillery shells packed in it. And it's been apparently targeted against a hotel that caters to foreign or western interest.

ARRAF: What can you tell about the way the attack was carried out, about the damage that's been done, about the bomb itself and who might have been behind it?

BAKER: Well, it's very difficult right now to tell anything about the bomb. The typical type of bomb we see in this area is a plastic explosive called PE4. We've seen a number of these same types of car bombs that have the artillery shells mixed in with them. It is certainly an attack that is similar that we've seen in the past to those carried out by terrorist organizations such as Ansar al-Islam or the Zarqawi network.

ARRAF: Why would Ansar al-Islam or al Qaeda, or anyone else, for that matter, attack a small, modest hotel here, do you think?

BAKER: We're standing right now on the Karada Peninsula, which is the most prosperous part of Baghdad, and probably in Iraq. And I think it's indicative of the reforms, the economic reforms that are taking place and taking root here. And it's a desperate attempt by these terrorists to undermine this prosperity and to intimidate the local citizens.

ARRAF: You've been here almost a year now. In fact, you've been in theater for longer than that, I think. It's probably a record. How has it changed, and how has this fight against insurgents changed since you've been here?

BAKER: Well, the fight certainly has changed since the year that we've been in Baghdad. You know, I personally believe that we have effectively defeated the Ba'athist influence that was loyal to Saddam when we first came here. And the major threat that we face, along with our Iraqi partners, are the terrorist organizations that are trying to undermine the progress in Iraq.

One of the major changes I've seen in the year that I've been in Baghdad is the professionalism and the capability of the Iraqi security forces, both the Iraqi police and their civil defense corps, who are out here tonight responding to this incident, and that are working shoulder to shoulder with 1st Armored Division as we conduct Operation Iron Promise, which is a series of offensive raids that we'll be conducting over a period of time with the Iraqi security forces to demonstrate how capable and professional they are, and to also showcase that they are taking the lead for security in Iraq.

ARRAF: Now, part of the aim of that operation, we understand, is to target religious extremists. What's your view on how much of a role religious extremists might play? And how much of the violence might be Sunni, Shia, Muslim violence?

BAKER: In this particular district of Baghdad, I don't see the sort of animosity or friction that a lot of people talk about between the Shias and the Sunnis. And maybe because a large city is more homogenous. It may be because there's a particular educated and affluent part of the Iraqi society. But what I see is Shias and Sunnis who consider themselves Iraqis first and have a great sense of nationalism.

That's one of the reasons I'm personally very optimistic about chances of the future in this country that these different religious groups and ethnic groups, although they are diverse, in fact have a sense of national identity, and through that identity can pull together and just make progress that this country needs to be successful in this part of the world.

ARRAF: If we look behind us, we can see they're still devoting quite a lot of effort to digging. Is it possible that anyone would be left alive in this?

BAKER: I think it's always possible. And you have to be optimistic in this business. And, as you can tell, this group has not quit.

They're aggressive; they're committed to what they're doing. And if there is anybody still alive in this rubble, I'm confident the Iraqi emergency services will find them.

ARRAF: Just finally, Colonel Baker, we're heading into some quite important dates. The anniversary of the fall of Baghdad, the anniversary of the war, another major Shia holiday. Are you expecting more attacks?

BAKER: Well, we are always looking for clues as to why or when the enemy may increase their attacks in this area. They like to tie them to key dates. And, of course, the beginning of the ground phase of the war in Iraq is one of those dates that we are looking at very closely. We're taking a lot of precautionary measures, and we're also taking a lot of offensive measures to act before the enemy gets a chance to act. ARRAF: If you look at a lot of these suicide bombings, though, we have not heard a lot of people being -- of cases being solved, of finding out who was behind these. Why is that?

BAKER: Well, it's particularly difficult to interview somebody after they've detonated a 1,000-pound bomb that they've been driving around the city. And the nature of a terrorist organization, they have a cellular structure. They're very close-hold in the way they exchange information. So typically it's difficult to gain a lot of information on them.

ARRAF: Thank you very much.

BAKER: All right. And have a good trip back to Canada.

ARRAF: Thanks so much.

That was Colonel Ralph Baker, Kyra, who has been handling these kind of explosions and trying to rebuild this neighborhood, this sector for essentially since the end of the war here. Telling us that it appears that this obviously was a very powerful bomb, part of the Army's continuing fight against insurgents and people he believes were increasingly foreign fighters -- Kyra.

PHILLIPS: And as he talks about that powerful bomb, Jane, and you do also, you obviously can see the effects of it there. Stay with us, Jane. Hold on just a second, because I want to bring our Mike Brooks in. As you know, he used to be with the FBI counterterrorism group and has responded to explosions like these all around the country.

Why don't we first talk about the explosive, and Colonel Baker believing it's the PE4 number of artillery shells. Why don't you tell us the extent or give us some background on this type of explosive.

MIKE BROOKS, CNN CORRESPONDENT: Well, that's the kind of explosive. The PE4 that Colonel Baker was just talking about is an RDX-based plastic explosive. Very similar to what we see in other explosions, C4 military explosions that's used here in the United States. But it's made in either England or Portugal.

There are a number of different kinds of PE4 explosives. So it's either made in England or Portugal. Again, as he said, combined with ordnance, with artillery shells.

And as we're looking at some of the footage earlier, we saw the hood of that orange vehicle a number of times, and you see some of the rips through that. That's the blast effect damage that's coming from either the artillery shells or something else they may have used as a booster. As well as some of the damage on the front of the buildings here, the digs you see. All blast effect damage from that powerful bomb.

PHILLIPS: Well, hold on a second. I don't know if the photographer there in Baghdad can hear us, but if the photographer can hear us, it's off to the right where those cars are, and that rubble of explosives that you were talking about. Terrific, the photographer can hear us. Perfect.

Keep moving over there to the right. Mike, you tell us when to stop. This is what you were talking about. These cars, right over here, right?

BROOKS: Right. We saw a car that had a orange hood with some very, very deep gouges, as we're coming up to it now.

PHILLIPS: There it is.

BROOKS: You'll see some of the blast effect damage just on the car. Some of the digs. You see some of the cutting of the metal.

That is reminiscent of what we saw in other bombings around the world where a large high explosive was used. Khobar Towers, the bombing of the U.S. Embassy in Nairobi in 1998, where a high explosive was used. And again, as Colonel Baker was saying, this PE4, plastic explosive, very similar to military C4 that we've seen used overseas before.

And then combined with the military ordnance, it just makes for a just unbelievable powerful bomb. He's saying 1,000 pounds. From the size of that crater after the investigators get in there, after the search and rescue effort is done, they can do some calculations by looking at the damage it's done and see exactly somewhere, usually within 1,000 or 2,000 pounds, exactly how much was used in that from talking to people.

He's saying about 1,000 pounds. I would say that would be close, 1,000 to maybe 2,000 pounds of high explosive.

PHILLIPS: As an investigator, how would you take a look at what's happened here, take a look at the type of explosive that was used, and try to find who is responsible? I mean, is there any way to make a trace...

BROOKS: Well...

PHILLIPS: ... a connection?

BROOKS: ... there is some ways to make links. You have about a 50-person team there from the FBI that's been there for months. They've been working on all the other bombings. And there's a database that they have, a system that they take all the evidence, they put them in one database, and they also take all the intelligence they're getting and put in another.

And they can make a link analysis from one scene to another scene to another scene and see exactly if any of these are linked. But what we've been seeing with the number of different bombs, some of the remotely detonated, some of the timed, and now what we're hearing, that possible a suicide bomb here with a very large vehicle used, they can link that to see if they were connected with any of the other bombings over the number of months in Baghdad, in some of the outlying cities, and other places in the world.

Because you'd be surprised at what you can find once they start working a scene. Just a little piece of evidence can link different explosive devices.

You might find a cap on this scene that might be linked with a cap that was used in a bombing years ago. Because, you know, they do have storehouses of explosives, and they are shipped around from place to place by different groups. So you'd be amazed to find out the links that they can make once they get into the investigation.

PHILLIPS: As you and I were looking at these pictures, we noted, look at the old versus the new.

BROOKS: I'm amazed. You know, we spoke to the brigadier general just a few minutes ago, and he had an old helmet on. It looked like almost an old German helmet, if you will. But then you look at some of the other more modern helmets and you see the civil defense force with their -- they call them running coats -- fire department running coats on. And you look at the old and the new.

It's just -- as Jane was saying, we take a couple steps forward and a couple steps back. But what we're seeing right here with the equipment, at least, that they're getting, I doubt if they had that kind of equipment before. I'd say that's definitely a step forward for the civil defense forces, for the police, and the EMS people that are going through the rubble right now.

PHILLIPS: Only thing lacking, you don't see a lot of the machinery or the ability to -- I mean, there's still a lot of hand-to- hand digging going on here.

BROOKS: There is. And many places -- when we were in Nairobi, before we got there, you saw a lot of hand-to-hand digging by personnel, as we're seeing now. And then as they got more personnel in, and with heavy equipment, I'm sure that the military does have some heavy equipment from their engineering corps that they can bring in to assist should it be needed when the sun comes up. Because you start using heavy equipment sometimes in the dark where there's not a lot of light, and you could run into even more problems.

And they'll come in, assess it, and see if there are possibly any survivors. Because we see them flipping over the rocks now. And there is a possibility, slim as it may be, that there could be some pancaking (ph) and some void spaces where there could be people underneath. Again, always hold out hope for that kind of thing -- Kyra.

PHILLIPS: Never want to give up hope.

BROOKS: No, absolutely not.

PHILLIPS: Mike Brooks, thanks so much.

If you're just tuning in, once again, you're looking at live pictures as rescue crews still try and look for survivors, of course, not giving up that hope. Also trying to recover the bodies of those that were killed in this explosion that happened about three and a half -- three hours, 45 minutes ago in the evening there in Baghdad. It happened about 8:10 Baghdad time.

Twenty-seven people dead, 41 injured. Iraqi police, Iraqi fire department, and U.S. forces on the scene, continuing to work the investigative side of things and also looking for additional bodies and possibly survivors -- Miles.

MILES O'BRIEN, CNN ANCHOR: And just to underscore that point, on the search for perhaps additional survivors, that in many cases, even if there is heavy equipment available, the searchers will elect to do a hand search for fear of injuring somebody beneath the rubble here.

Let's bring Jane Arraf back in. And what we're seeing here is a scene, a grim scene, indeed. The unearthing of at least one more body, bringing the total to 28, according to our most current count here. And we're told this was a location where a woman and her children were suspected to have been.

And thus far, Jane, no indications that there is anybody alive underneath this rubble.

ARRAF: Unfortunately not, Miles. There had been the hope that someone could perhaps have been found alive, but that hope has really been extinguished by just looking at the scene.

Now, these rescuers -- and we have to point out these are Iraqi Civil Defense forces, Iraqi firemen -- they are all Iraqi here, and they're all from new organizations. And they're trying desperately to find what, at this time, we have to assume are the bodies.

They're essentially standing in what probably would have been the living room of this house. Just a few hours ago, these people might have been watching television. There seems to be electricity on. There isn't always.

And then this car bomb packed with 1,000 pounds of explosives believed to be a suicide bomb, according to U.S. military officials, detonated just a few feet from here. Not only did the hotel across the street, a modest hotel, one that nine people were staying in, virtually collapse, it almost destroyed the houses across the street.

And now what they're looking for is, according to the local fire chief, perhaps three children who may still be under there. The fire chief tells us that one of the injured taken to the hospital begged Iraqi rescue workers to come back to this house and look for his family. His family was his wife and three children he said were still here. They've pulled out one of the bodies. There may still be three left, possibly children -- Miles.

O'BRIEN: The scene that we're seeing here, Jane, is this being repeated in other parts in the immediate area surrounding the blast? Are there other operations under way right now to try to pull people from the rubble? ARRAF: This is the sole focus of the operation right now just down the street. It's very dark here. There are very few lights. But if we could see, what we would see is this huge crater eight feet by 10 feet where the bomb detonated, as well as debris still lying around.

Traditionally, what happens here -- and we've seen enough of them to see a pattern -- is that first the rescue workers come. The ambulances, the fire trucks, trying to deal with the chaos here. And it was an incredible scene at the time, Miles.

There was smoke billowing from the hotel. There were people going through the hotel trying to see if anyone was still trapped in there. There was a virtual riot going on here, as they believe there might still be people trapped in the rubble. And everywhere, security forces trying to push people back.

But after that, there is now what is a recovery effort for any bodies left. And U.S. investigators generally go in a little later to see what evidence they can find.

Now, we heard a short while ago from one of the commanders on the scene, the U.S. military commanders, that it's very hard to find evidence when it has essentially been detonated in a suicide bomb. That is one of the problems in this ongoing insurgency, one of the problems in these attacks that continue against targets like this -- Miles.

O'BRIEN: Of course, it doesn't take too much. You'll recall in the World Trade Center bombing years ago, there was a little piece of an axle that was recovered and a serial number, and that broke the entire case. So it doesn't take an awful lot of evidence as we look at the scene there.

Jane, I noticed off to the side there, U.S. forces standing by there. What is their role on the scene right now? Are they just enforcing a cordon around that area to maintain some security there?

ARRAF: They have been out in full force just awhile ago, Miles. And essentially, then they had brought in their armored vehicles to put a cordon around the area, to make sure that other vehicles could not get in.

That's generally what they do. They cordon off the area to make sure that they control who's coming in and out. There had been fears at the time that there would be a secondary explosion. And that has not materialized.

But they would also have experts to deal with that. And now, at the moment, what we appear to be seeing is essentially a support function. They have the philosophy of U.S. forces who, we have to remember, are handing over within the military -- this is 130,000 U.S. troops who are handing over to a slightly smaller number. But the biggest troop movement since World War II. And the handover on June 30th, by the U.S. and British occupying forces to the Iraqi government. Now, a theme of this has been that they're trying to get Iraqis, basically, to do more governing themselves, to do more policing themselves, and to do more work like this. So when they can, they do like to let Iraqi Civil Defense forces, Iraqi rescue workers take the lead and step in when needed -- Miles.

O'BRIEN: So -- you know, I don't want to be accused of being too cynical here, but they're deliberately standing back away from the cameras there to send a message to the world that Iraqis are handling the situation?

ARRAF: That might be a bit calculated. Essentially, what they're doing, there's not a lot they can do here at the moment. We have to be really frank about this.

There are no survivors. There's no one to take care of. The only thing they can do, really, is make sure that the security situation surrounding this area doesn't deteriorate. And to make sure that whatever potential evidence there might be isn't taken away for investigators to come in.

Then we do see -- we go out with the military quite a lot. And in going through the streets here today, for instance, when the 1st Armored Division in charge of Baghdad launched a major operation, their last big operation before shipping out, they were at the forefront, obviously, of raids on neighborhoods, of targeted raids for expected insurgents.

But at the same time, they were working with Iraqi Civil Defense forces. And they're doing something, they point out to us, that the U.S. Army doesn't normally do. It's normally left to Special Forces.

But they are, in fact, training for an army. And a large part of this -- as you can see, there are quite a lot of rescue workers here. But a large part of what the U.S. military is trying to do is make sure that they can one day leave to phase themselves out of a job. And to do that, they are trying to let Iraqi forces do as much as they can when they're prepared to do that -- Miles.

O'BRIEN: CNN's Jane Arraf on the scene there.

Let's turn our attention briefly to CNN's Kelly McCann, our security analyst, former U.S. Marine, and a person who was just in Baghdad. As a matter of fact, had some friends who were staying in that hotel specifically, has some familiarity with that district. But also can talk about the bigger picture of allowing Iraqis to handle their own security and their own problems, if you will.

Kelly, first of all, what are your thoughts specifically on this as a target, this particular location? That term "soft target" comes to mind. Of course, we don't even know if the suicide bombers were on their way to somewhere else, do we?

KELLY MCCANN, CNN SECURITY ANALYST: No, we don't, Miles. In fact, the way that things have operated there for some months now, we know that there are car bombs, vehicle-born explosive devices, or VBIEDs, that basically may have a target list of three to five potential targets. And they literally troll looking for vulnerabilities as to where they'll actually detonate the device or deliver the device.

But this particular hotel was extremely vulnerable. There were no barricades. There was no vehicle access control measures. There was no vehicle inspections. There was no bomb blast mitigation protection.

The only thing that would make it less of a good target, less of a good target, the predominant number of people staying there were Arab state businessmen who found the facilities acceptable, and were basically trying to conduct business in the area. There weren't a terrible amount of westerners staying at the hotel. So, other than it being structurally soft, the people inside weren't necessarily all comprised of westerners -- Miles.

O'BRIEN: Of course, the presumption there is that westerners are the target. And we have seen all kinds of attacks where specifically Iraqis have been the target.

MCCANN: Well, I think this really goes to the whole adage, you've got to break a few eggs to make an omelet. And I think that that's this adversary's philosophy. They simply don't care who they have to kill in order to create the disquiet and the instability that they're after.

We know that, of course, Zarqawi's network is up and active. We know that al Qaeda is in the country. They were ready to receive Hassan Gul (ph), who was caught in the northern portion of Iraq. A leader that high in the chain would not have even thought of going to Iraq if there weren't significant numbers to handle him and potentially plan operations down the line.

We know that the criminal element is being paid by former regime loyalists who now -- I don't know whether you could call them all Ba'athists or all Sunnis, but people who just aren't content with Americans being in the country. So you've got a very complex, layered threat that's in the country. It's a very sophisticated environment -- Miles.

O'BRIEN: Now, I don't suppose you'd want to tell us who your clients were there. But nevertheless, give us a sense of the kind of advice you can give them in this chaotic environment.

MCCAN: This will sound like cold, harsh words. It's not a place for amateurs. It's not a place for people who fancy themselves security types who don't have the depth of experience to deal in these kind of environments.

Quite realistically, when I was there, it is a little bit of a bug light to security types of all kinds of experience levels. Really, I mean, the best thing the contractors can keep in mind is that, going to do business in Iraq, where a normal security contract might comprise 4 percent of an overall budget, in Iraq you're going to talk about maybe 15 percent to 25 percent of the overall job must be contributed to security.

And don't even think of putting your people in there until there's an existing security procedure to handle them, to get them on the other hand. There's an urgency right now from CPA to get infrastructure rebuilt. That urgency is transmitted to the contractors, and sometimes security is overlooked, believe it or not -- Miles.

O'BRIEN: CNN's Kelly McCann, thank you very much.

And that about wraps it up for us. Just to reiterate, 27 -- now, actually 28 dead confirmed. More than 40 injured in the wake of that car bombing outside a hotel in old Baghdad now approaching four hours ago.

PHILLIPS: Rescue crews continuing to search through the rubble there beneath the hotel and neighborhood that's been leveled. Our coverage also continues. Wolf Blitzer picks it up right after a quick break.

Thanks for watching CNN's "LIVE FROM."

(COMMERCIAL BREAK)

WOLF BLITZER, CNN ANCHOR: I'm Wolf Blitzer in New York. Welcome back to our continuing coverage of the bombing of a hotel in Baghdad.

Twenty-eight people now confirmed dead. More than 40 people injured at the Mount Lebanon Hotel in central Baghdad.

CNN's Jane Arraf has been on the scene. She's still on the scene. She's joining us now live with more.

Jane, update our viewers who may just be tuning in right now, precisely what happened approximately four hours ago in Baghdad.

ARRAF: Wolf, it started with a huge explosion, which we now know was a huge car bomb. Careening down the street, a narrow street in the middle of central Baghdad, a car packed, according to U.S. military officials, with 1,000 pounds of explosives.

In front of us, there's a huge crater, eight feet by ten feet. And at least 27 casualties. At least 27 people dead. It appears a 28th person dead, as they've just carried out a body in what was essentially the living room of this house.

Now, what you're seeing behind us are rescue workers. But what they're really mounting is a rescue operation for the remains of people who are likely still trapped beneath there. There are not expected to be any survivors.

According to the local fire chief, he tells us that one of the injured begged rescue workers to come back to this house because his wife and three children were still here. They appear not to have survived. Just down the street, Wolf, the managing director of the hotel where the car bomb exploded in front of is sitting with his head in his hands. He says there were nine guests in the hotel at the time. He believe there were two Britains, two Jordanians, two Egyptians. And, until recently, there had been employees for a company that had started a mobile phone system in Baghdad.

Now this mobile phone system awarded under a U.S. contract, it's not clear whether this hotel, this small hotel was, indeed, the target of this bomb. But it was an absolutely devastating and very powerful car bomb that U.S. military officials here say there is the hallmarks of foreign fighters similar to other suicide bombs they've seen in this area in Baghdad -- Wolf.

BLITZER: Jane, as far as we know, no group or individual has claimed responsibility for this act of terror as of yet. Is that right?

ARRAF: That is correct. In fact, Wolf, it's very rare that organizations claim responsibility. In fact, I can't think of a case where they have. Now, fingers are often pointed at Abu Massad Zarqawi (ph), Jordanian national convicted sentenced to death in Jordan, who has written a letter, according to U.S. officials, in which he took responsibility for 25 unspecified suicide bombs. But that was a letter that was meant to go to the al Qaeda leadership, appealing for help and starting a civil war here. Appealing for help, they say, because he had failed to enlist the support of Iraqis.

And indeed what U.S. officials say is that increasingly these attacks seem to be carried out by foreign fighters but perhaps with the help of former remnants of the Baath party, former Saddam loyalists, along with common criminals. A lot of the evidence would have been lost here with the huge explosion. The street is devastated, the hotel badly damaged. These houses, as you can see, in ruins. Not much evidence left to go on. Just more questions than answers -- Wolf.

BLITZER: Jane, we're looking at some new video that we're just getting in to CNN right now, showing from the flames that had clearly erupted in the aftermath of this explosion, about four hours ago. The -- is the fire completely put out by now?

ARRAF: It is, it burned for quite awhile, Wolf, and almost an hour after the explosion there were still flames rising and smoke billowing from here. In fact there were flames rising from this site, from the wood that formed part of this house in flames. Despite that these rescue workers, and these are all Iraqis you see behind us, were picking up pieces of these burning timbers and throwing them aside, scrambling through the bricks to try to reach anyone who they thought at the time might have still been alive. The fires are out. When we came to the scene there was fire billowing from the hotels. You could see it through the windows. You could also see through the windows, Iraqis searching through the hotel for any people they believed might have survived. It appears there are no survivors left here. Just possibly the remains of more victims. BLITZER: Earlier we had heard that when U.S. troops got to the scene, some of them were angrily attacked by Iraqis who were clearly frustrated and blamed the Americans for what's happening at the Mount Lebanon hotel and the lack of security in Baghdad. I wonder if U.S. troops are still there searching in the rubble, helping these Iraqi volunteers go through the disaster that clearly has unfolded there.

ARRAF: There was a small number of U.S. troops here, Wolf. The division in charge of Baghdad, the first armored division started a major operation today. In fact, its last before shipping out after almost a year ago. And this operation was aimed at rooting out extremists, picking up weapons, explosives, trying to make it a safer place. Now, there are a few U.S. military personnel on site. And there were more at the start of this explosion. They created a cordon to keep people away. They tried to maintain some sort of control. To be perfectly honest there's really not a lot they would seem to be able to do here right now.

It's not clear if there are survivors. They're essentially leaving it to the Iraqi forces. We have to remember that these are, indeed, what we're seeing now, despite this rubble, despite this devastation, there's something new behind us. These fire men. There did not used to be a separate Iraqi firefighting company. They have new fire trucks. These are people who are deeply committed. There are Iraqi police around me. I saw some Iraqi civil defense workers, and these are all new organizations created after that vacuum when the U.S. dissolved the Iraqi army, dissolved the police.

They're trying to build them up again and they are very slowly being built up. And here what you see are Iraqis. This is an Iraqi effort. And that would explain some of the anger, as well. This is their country and they feel they don't really have control of it anymore. They feel the borders are open. They feel the U.S., although it liberated from Saddam Hussein, also liberated them from a sense of security. They never had car bombs before and they're looking for anyone to blame and the easiest target are Americans -- Wolf.

BLITZER: Do they have the sophisticated equipment to go through the rubble, these firefighters, these rescue workers, all of whom are volunteers around this -- what used to be a hotel in Baghdad to look for survivors if there are any survivors?

ARRAF: They don't have a lot of equipment, Wolf. You can probably see this man who has just taken off his gloves. He's hurt his fingers because they were digging with bare hands through the rubble. But in a case like this, this is very delicate work. If you thought there was the slightest chance there would be survivors you really couldn't come in here with specialized equipment. You could perhaps come in with dogs that would be able to tell whether there were still signs of life, would be able to tell whether there was anything left to rescue. They don't have those.

There are a lot of things these people don't have. There's a lot of things this country doesn't have. People still don't have jobs. The Iraqi civil defense forces don't have enough radios. They don't have enough vehicles. The Iraqi police don't have enough uniforms. There's a severe shortage of very basic things here.

Now the U.S. argues that they're essentially creating this from scratch. That this is a new country, that these are new organizations, and it's not going to happen overnight. But no, they don't have specialized equipment. They have their hands. They have their will. They have this intense desire to be able to find the remains of anyone down there, and put them to rest. And at least rest a measure of control from this terrible situation that they are in.

BLITZER: Jane, one final question. No one can ignore the fact that this is the week of the first anniversary of the U.S.-led invasion of Iraq. I assume going in to this week there were warnings, there was heightened security, there were precautions that were taken precisely to avoid what we have now seen at the Mount Lebanon Hotel where you are right now in Baghdad. Give our viewers a sense of the kind of anticipation, this first year anniversary had created inside Baghdad.

ARRAF: You would expect there would be anticipation, but perhaps more a feeling of anxiousness and dread. This anniversary is something that many people fear, including U.S. military officials fear will spark more attacks like this. They fear that those attacks will come whenever there's an anniversary, a major anniversary, a major religious holiday. And indeed, it is what we have seen time and time again. That whoever is behind these attacks seek out targets like this, they seek out dates like the approaching anniversary, anything designed to make maximum impact, and to remind Iraqis that their country is not under control.

It's created a real feeling of fear. And that is perhaps one of the biggest obstacles here. That people here just do not know which way this is going to go. Even the most optimistic of people will tell you that they have faith that in five years or ten years this is going to be an amazing country, the people will have jobs, that the oil will flow again and that peace will perhaps reign. But in the short-term people are very, very frightened.

BLITZER: CNN's Jane Arraf. Our Baghdad correspondent. Only moments after this bombing occurred about four hours ago, shortly after 8:00 p.m. Baghdad time. She was on the scene. She got there. She's been reporting nonstop since. Now after midnight in Baghdad. Jane, we'll get back to you. Thanks very much for that report.

CNN's Mike Brooks is standing by at the CNN Center in Atlanta. Mike, when we hear Jane report of a 1,000 pound car bomb, that causes an enormous amount of devastation. Give our viewers a little bit of comparison. The car bombing in Oklahoma City at the Federal Office Building there, do you remember how big of a bomb that was?

BROOKS: That was a different kind of explosion. That was about a 2,000, 2,500 pound bomb. But if we go back to 1996, the bombing of the Khobar (ph) Towers complex in Dhat (ph), Saudi Arabia, that was a minimum of 5,000 pounds of C-4 explosive. Earlier we spoke with Colonel Ralph Baker (ph) from the U.S. army and he was talking about the explosive, he said it was about 1,000 pound bomb. And he said it was made up of an explosive called PE-4. That is an RDX-based plastic explosive similar to C-4, the military plastic explosive that a lot of people are familiar with, used by our U.S. forces. It's made in Portugal and also in England.

But he said they combined that also with military ordinance. Artillery shells. That's why we could see some of the blast effect damage, some of the tearing of the automobiles there. That would be caused by the metal from the artillery shells. We've seen these kind of bombs used prior -- over the prior months in Baghdad, in a number of different scenes. And my sources who have been over there investigating some of these bombings say that that is the kind of bomb that they're seeing now. Regular plastic explosive, high explosives, combined with military ordinance.

BLITZER: Old-fashioned explosive devices, nothing very sophisticated. But clearly those old-fashioned explosives can cause an enormous amount of damage as we clearly see. Mike, earlier when we were first reporting about four hours ago what was going on, there was conflicting information about whether this was a car bomb or a rocket or mortar attack. Once you get to the scene it would be easily discovered what, in fact, caused this devastation. It wouldn't be very hard to make that determination, would it?

BROOKS: No, once you get there and talk to some of the people there on the scene, what they saw, what they heard prior to the explosion, right after the explosion, and then you take a look at the crater and you look at the blast effect damage, then you can start to tell exactly what kind of vehicle bomb it was. In this case it looks like it was either a car or a truck vehicle bomb. Improvised explosive device placed in that. The thing now, as Jane has been reporting now is the search and rescue effort. After that then you'll start into the post blast investigation. The FBI has had a presence there in Baghdad for a number of months. They have about a 50-person team there.

Once that scene is secured, once the search and rescue effort is done, the FBI will assist the Iraqi police in trying to determine exactly what kind of bomb was used. What kind of explosive was used if it was in fact the PE-4-type plastic explosive and ordinance and they'll continue with their investigation trying to put together a link analysis to see if this bomb is connected with other bombs similar to what we saw at the U.N. headquarters back a number of months ago and some of the other bombs in and around Baghdad. Also to see if there's any links with any other terrorist bombings outside of Baghdad. Again it's very, very early in the investigation right now. This will happen over a matter of days.

BLITZER: Mike, this hotel in Baghdad, unlike the Palestine hotel or the al-Rashid (ph) hotel, many of our viewers familiar with those hotels because many journalists, government workers, U.S. military and civilian personnel living there. This hotel was described as a soft target. Tell our viewers what that means.

BROOKS: Soft target is something that is readily available. We heard earlier from CNN contributor/security analyst Kelly McCann who had been over there and he was talking that apparently the perimeter around this hotel is not as secure as the perimeters we see in the Palestine hotel and other hotels within the Green Zone. And this Jabal (ph) Lebanon hotel is apparently opening to business. There aren't many military personnel there where you would see a more fortified hotel like the Palestine and other hotels.

But again it's a soft target. It's believed that this was a suicide bomb driven up to the hotel and detonated. Again soft target is basically a target that's not very fortified. And as Kelly was saying earlier apparently this was definitely a soft target because it was open to business. And it was a fairly new hotel only about a year old. This person was open for business, and the bottom line is the bottom line. He was there. He didn't want to make it look like it was a fortified hotel like some of the other ones because he wanted to get more business in the hotel. Kelly McCann was saying this, too, from his recent visit there it was definitely a soft target.

BLITZER: Kelly McCann had actually been to the Mount Lebanon or Jabal Lebanon hotel, Jabal in Arabic means Mount. That's why sometimes you're seeing Mount Lebanon, sometimes Jabal Lebanon as the name for this hotel. CNN's Mike Brooks, we'll get back to you. Our Jamie McIntyre, our senior Pentagon correspondent is standing by gathering information from his vantage point. What are you hearing at the Pentagon?

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Well, Wolf, generally this event at the Pentagon is viewed as typical of the kind of danger that Iraq is in this interregnum period between the time when the U.S. military is in complete control and when there's a transfer of authority. This is exactly the kind of thing that Pentagon officials have been concerned about because they see it as a sign that the anti-U.S. insurgents, and perhaps their alliance with al Qaeda linked groups are becoming increasingly desperate to foment civil unrest in Iraq. And I think that's basically how this is being read. The Pentagon says it's way too early to know exactly who's responsible.

Defense Secretary Rumsfeld said earlier today that the U.S. was still gathering information about the event. But the U.S. is also praising the efforts of the Iraqi forces. Of course the whole strategy now for the United States in Iraq is to lower the profile of the U.S. forces and turn over more and more authority to Iraqi forces, Iraqi police, and also Iraqi firemen, to take responsibility for what's going on there. Of course the result has been that there have been fewer U.S. deaths in Iraq, although there is a steady stream of U.S. casualties, but the number of Iraqi civilians, and the number of foreigners, including some American civilians being killed in recent attacks has been going up.

So they do see it as a change of tactics on the part of the anti- U.S. forces. They also see it as a sign of desperation and the U.S. is vowing that these kind of attacks, even as they may come -- even as there may be more of them in the days and weeks ahead are not going to deter the U.S. from its mission of trying to turn over a more stable Iraq to some kind of provisional Iraqi authority.

BLITZER: This is an especially delicate moment for the U.S. military, Jamie, in Iraq because it's a time of transition. U.S. forces being rotated out after a one-year tour of duty in Iraq, causing potentially significant problems for the U.S. military there. What -- how significant are these problems? What are you hearing?

MCINTYRE: Well, it is the biggest rotation of U.S. forces since World War II. More than 100,000 troops coming and going from Iraq over the course of a year. The U.S. has been doing it in a very deliberate way trying to ensure that there's enough of an overlap that the expertise gained by the troops there the first year is passed on to those who are replacing them. In some areas of Iraq, the transfer is involving fewer troops replacing a larger number of troops, particularly up in the north where they had about 20,000 troops in the northern sectors going down to about 8,000 troops.

They have to manage that situation. They believe they're managing it pretty well. Most of the problems that they're having are not so much from any vulnerabilities created by the rotation of troops, but more just from the continuing evolving tactics of the anti-U.S. forces, which are continuing to in the words of Secretary Rumsfeld go to school on the U.S., try to figure out what the vulnerabilities are. And as the U.S. increases the protection for the military and adopts more effective tactics there, it's forced the terrorists to move against civilian or so-called soft targets where it's almost impossible to protect. This blast today against a hotel in a civilian area, unless you're going to put walls around every building, there's no way to protect against it.

BLITZER: Jamie McIntyre reporting for us from the Pentagon. Thanks very much. What our viewers are seeing now are rescue workers in Baghdad, at the Mount Lebanon hotel. These are Iraqis who are still searching for remains of people who may have been inside the Mount Lebanon hotel at the time of this car bomb blast a little bit more than four hours ago. Right after 8:00 p.m. local time. It's now after midnight in Baghdad. CNN's security analyst Kelly McCann was at the Mount Lebanon hotel, Jabal Lebanon hotel not that long ago. In fact has some friends who were staying there. First of all, tell our viewers what kind of hotel this was. We see rubble now. We don't see much more than that.

MCCANN: It was a street-front hotel, wolf, that was basically renovated after the war, local businessmen wanted to get business moving in that area. It's a lot of contractors trying to get a business footprint in Baghdad right now. And it catered to a variety of different clientele. It was multistoried. Fairly upbeat standard kind of hotel. But, the striking difference against some of the major hotels in Baghdad of course was the absence of some of the extreme security we see at the Sheraton, the Palestine, the Baghdad hotel -- Wolf.

BLITZER: The whole nature of the attack, a car bomb going in with 1,000 pounds of old-fashioned explosives, causing this much damage, how surprised are you looking at these pictures?

MCCANN: I'm not, Wolf. Remember that the construction standards overseas are significantly different than you find here in the U.S. What a 1,000-pound bomb might do somewhere in the U.S. where there's a different code of construction, and what a 1,000-pound bomb would do throughout the Middle East, where they don't have to necessarily worry about earthquakes or extreme weather, is significantly different. This kind of devastation and the proximity of the device is significant. As you can see the crater on the street is very significant. There was virtually no bomb blast mitigation. Undoubtedly the building took most of the blast and the surrounding areas, as well -- Wolf.

BLITZER: Do you have any indication whether there was a suicide car bombing or remotely timed, a remote device that launched that caused this explosion to occur?

MCCANN: You know, I don't know Wolf, and I haven't heard it reported. I will say from my knowledge of the area that it could have been either. Because there was virtually no way that the checks were being in place, vehicle access wasn't a big deal there. It could have been a vehicle that was parked. It also could have been a vehicle driven up.

BLITZER: Because at the time of -- as you well remember and many of our viewers will remember, at the time of the Jordanian embassy bombing in Baghdad, a car was parked not that far away from the Jordanian embassy and there was a remotely timed device that exploded that car causing that devastation there. So there presumably will be an investigation to see if there are any fingerprints or any forensic evidence linking this explosion to some of the earlier car bombings in Baghdad including the International Red Cross and the U.N. headquarters building.

MCCANN: Absolutely. They'll be looking for that. The other thing is that the modus over there, you can see probes. In other words the adversary might actually leave vehicles in place that have been stolen to see if they're dragged away, totaled by the Iraqi police, if they're noticed and reported. So the biggest concern that people have or should have in country is surveillance. All of these attacks are done after some amount of surveillance is conducted on the target. And basically then you'll see either dry runs or probes. If a probe was missed, then it might have been moved up on the target list, because a lot of the adversaries there certainly aren't afraid of dying. They're not afraid of being arrested. They're afraid of failure. The extent that, as a security person you can induce a doubt whether they will or will not succeed, you can push them to another venue -- Wolf.

BLITZER: As we take a look at these pictures. Rescue workers at what used to be the Mount Lebanon hotel in Baghdad continuing to search, I assume, for remains of people who had been inside. I want to show our viewers some videotape that we've received. Videotape showing the aftermath. This is only minutes after the bombing occurred. Let's just watch and listen.

(BEGIN VIDEOTAPE)

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(END VIDEOTAPE) BLITZER: The panic and the fear clearly evidenced in these pictures that were taken literally moments after a car bombing occurred at the Mount Lebanon hotel in Baghdad. Now back to live pictures, rescue workers supported by U.S. personnel clearly involved in trying to search for some of the remains. You can see CNN's Jane Arraf. We're going to take a quick break. When we come back we'll go back to the scene, we'll bring Jane back. We'll get -- we'll catch our breath. See what's going on. At least 28 people dead, 40 wounded in this horrible car bombing in Baghdad. We'll be right back.

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